CALGARY – The government of Alberta, facing a ballooning deficit as resistance to major oil export pipelines builds, is preparing to launch an international competition to “identify innovative uses for carbon emissions.”

Alberta environment minister Diana McQueen will join the province’s Climate Change and Emissions Management Corp. (CCEMC), which collects money from a $15-per-tonne levy applied to companies that exceed set emissions limits, to unveil the competition, dubbed a “grand challenge,” Thursday.

Up to $35-million in grants will be made available over five years through the province’s climate fund “to produce multiple technologies that will provide significant net reductions in greenhouse gas emissions,” according to a CCEMC news release.

Alberta has been whacked by discounts on its heavy oil as production from U.S. tight oil formations surges, clogging up continental pipelines. It now faces a deficit of up to $4-billion, compared to earlier projections of $2.3-billion to $3-billion, according to a third-quarter fiscal update released Tuesday.

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The move to spur a global technology competition comes on the heels of a major demonstration against TransCanada Corp.’s Keystone XL pipeline in Washington D.C., as well as the recent suggestion by U.S. Ambassador to Canada David Jacobson that Canadian action on curbing carbon emissions might help cast the oil sands in a better light south of the border.

Resource revenue was $2.4-billion lower than expected in the first nine months of 2012, the province said Tuesday. Its overall funding shortfall now stands at $763-million.